BUSINESS INDIA, MUMBAI V. ASST CIT 12(1), MUMBAI

ITA 5071/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8595 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 08-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Section: 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5071/MUM/2012 (ASSESSMENT YEAR: 2007-08) M/S. BUSINESS INDIA VS. A C I T 12(1) 8, GYAN BHAVAN KUMTA STREET, BALLARD ESTATE, MUMBAI 400001 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AADFB7133Q APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI SUMAN KUMAR DATE OF HEARING: 09.11.2017 DATE OF PRONOUNCEMENT: 09.11.2017 O R D E R PER PAWAN SINGH, J.M. THIS APPEAL BY THE ASSESSEE UNDER SECTION 253 OF TH E INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-21, MUM BAI DATED 04.04.2012 FOR A.Y. 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.83,16,207 ON ACCOUNT OF DIMINUTION IN VALUE OF SHARES HELD AS STOCK IN TRAD E. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.19,08,112 U/ S. 14A OF THE INCOME TAX. 3. THE FACTS IN BRIEF AS GATHERED FROM THE ORDERS OF L OWER AUTHORITIES ARE THAT THE ASSESSEE FIRM, ENGAGED IN THE BUSINESS OF PUBLISHING DIRECTORIES, EARNING CONDUCTING CHARGES, DEALING IN SHARES AND O THER SECURITIES AND DEVELOPING AND NURTURING NEW VENTURES, FILED ITS RE TURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 30.10.2007 DECLARING LO SS OF ` 1,85,99,560/-. THE AO WHILE FRAMING THE ASSESSMENT ORDER DISALLOWE D ` 83,16,207/- WHICH ITA NO.5071/MUM/2012 M/S. BUSINESS INDIA 2 WAS CLAIMED ON ACCOUNT OF LOSS OF DIMINUTION IN VAL UE OF SHARES AND DISALLOWED ` 29,08,439/- UNDER SECTION 14A. ON APPEAL BEFORE THE CIT(A) BOTH THE DISALLOWANCES WERE CONFIRMED. FURTHER AGGR IEVED BY THE ORDER OF THE CIT(A) ASSESSEE HAS FILED THE PRESENT APPEAL BE FORE US. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE REP EATED POSTING OF CASE. THE ASSESSEE IS NOT APPEARING SINCE BEGINNING DESPITE SERVICE OF NOTICE THROUGH RPAD. HAVING LEFT WITH NO OPTION EXC EPT WE HEARD THE LEARNED D.R. FOR REVENUE AND TO PROCEEDED TO DECIDE THE APPEAL ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. 5. THE LEARNED D.R. FOR THE REVENUE SUPPORTED THE ORDE R OF THE AUTHORITIES AND ARGUED THAT THE ASSESSEE CLAIMED SI MILAR LOSS IN A.Y. 2004- 05 WHICH WAS DISALLOWED AND WAS CONFIRMED BY THE LE ARNED CIT(A) VIDE ORDER DATED 18.10.2010. THE ASSESSEE HAS NOT SUBSTA NTIATED ABOUT THE CLAIM OF LOSS. THUS NO RELIEF WAS GIVEN TO THE ASSE SSEE. THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CONTENTIONS. FOR DISALLOWANCE UNDER SECTION 14A THE LEARNED D.R. ARG UED THAT DURING THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THE AS SESSEE MADE INVESTMENT IN MUTUAL FUNDS AND DEBITED INTEREST EXP ENSES OF ` 46,83,688/- IN PROFIT & LOSS ACCOUNT. THE AO WORKED OUT THE DIS ALLOWANCE BY INVOKING THE FORMULA PROVIDED UNDER RULE 8D. THE ASSESSEE FA ILED TO SUBSTANTIATE ITS CONTENTION ABOUT DELETING THE DISALLOWANCE WORK ED OUT BY THE AO. IT WAS FURTHER ARGUED THAT THE ASSESSEE HAS NEITHER FA ILED ANY DOCUMENTARY EVIDENCE NOR ANY SUBMISSION TO SUBSTANTIATE THE CON TENTIONS, HENCE THE APPEAL OF THE ASSESSEE BE DISMISSED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED D .R. FOR REVENUE AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. TH E ASSESSEE CLAIMED LOSS ON ACCOUNT OF DIMINUTION IN VALUE OF SHARES OF ` 83,16,207/-. THE AO SHOW CAUSED THE ASSESSEE AS TO WHY THE SAID CLAIM NOT TO BE DISALLOWED. THE ASSESSEE CONTENDED THAT THE EXPENDITURE IS ALLOWABL E UNDER SECTION 37 OR THE ACT. THE CONTENTION OF THE ASSESSEE WAS NOT ACC EPTED BY THE AO HOLDING THAT THE SAID PRO VISIONS ARE NOT ALLOWABLE UNDER SECTION 37. THE ITA NO.5071/MUM/2012 M/S. BUSINESS INDIA 3 AO FURTHER CONCLUDED THAT THE ASSESSEES CLAIM TO B E IN THE BUSINESS OF TRADING OF SHARES AND IS TAKING CLOSING STOCK AT CO ST PRICE AND CLAIMING PROVISION FOR DIMINUTION. THE ASSESSEE IN THE SUBSE QUENT YEAR THE OPENING STOCK HAS TAKEN AT COST PRICE OF SHARES. THUS THE A SSESSEE WAS VALUING SHARES AT COST PRICE AND NOT MARKET PRICE. HENCE TH E AO CONCLUDED THAT IT WAS A MERE NOTIONAL LOSS WHICH IS NOT ALLOWABLE. TH E LEARNED CIT(A) CONFIRMED THE DISALLOWANCE HOLDING THAT THE ASSESSE E CLAIMED SIMILAR LOSS IN A.Y. 2004-05 AND ON APPEAL THE SAME WAS CONFIRME D VIDE ORDER DATED 18.10.2010. THE LEARNED CIT(A) CONFIRMED THE DISALL OWANCE FOLLOWING THE EARLIER YEARS PRECEDENT. 7. BEFORE US NEITHER THE ASSESSEE HAS COME FORWARD NOR FILED ANY DOCUMENTARY EVIDENCE TO PROVE THIS CONTENTION. THUS WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LEARNED CIT(A). THUS THE DISALLOWANCE OF ` 83,16,207/- CLAIMED ON ACCOUNT OF DIMINUTION OF VAL UE IN SHARES IS SUSTAINED. 8. THE OTHER GROUND RELATES TO DISALLOWANCE OF ` 19.08,112/- UNDER SECTION 14 OF THE INCOME TAX ACT. THE AO WHILE PASS ING THE ASSESSMENT ORDER INVOKED PROVISIONS OF RULE 8D AND DISALLOWED INTEREST EXPENSES OF ` 12,09,112/- AND 0.5% OF AVERAGE VALUE OF INVESTMEN TS, WORKED OUT AT ` 16,99,327/-. THUS A TOTAL SUM OF ` 29,08,439/- WAS DISALLOWED. THE LEARNED CIT(A) OBSERVED THAT PROVISIONS OF RULE 8D WERE NOT APPLICABLE IN THE YEAR UNDER CONSIDERATION. THE LEARNED CIT(A) EX AMINED THE BALANCE SHEET OF THE ASSESSEE AND CONCLUDED THAT ALL PARTNE RS CAPITAL ACCOUNT WAS IN NEGATIVE OR THERE WAS NOT RESERVES AND SURPLUS. UNSECURED LOANS OPENING BALANCE WAS ` 3.10 CRORES WHEREAS THE CLOSING BALANCE WAS ` 3.61 CRORES, THEREBY AN INCREASE OF ` 49 LAKHS IN SECURED LOANS. THERE WAS AN INCREASE IN UNSECURED LOANS OF ` 1.90 CRORES AS OPENING BALANCE WAS ` 172.39 CRORES AND CLOSING BALANCE WAS ` 174.29 CRORES. THE LOANS AND ADVANCES GIVEN OPENING BALANCE WAS ` 43.58 CRORES WHEREAS THE CLOSING BALANCE WAS ` 59.47 CORES THEREBY AN INCREASE OF ` 15.89 CRORES. ON THE BASIS OF THIS OBSERVATION THE LEARNED CIT(A) CONCLU DED THAT THE INVESTMENTS WERE MADE FROM INTEREST BEARING FUNDS. THE LEARNED CIT(A) CONFIRMED THE ITA NO.5071/MUM/2012 M/S. BUSINESS INDIA 4 INTEREST EXPENDITURE OF ` 12,09,112/-. HOWEVER, THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES WAS REDUCED TO ` 6,99,000/-. THE LEARNED CIT(A) SUSTAINED THE DISALLOWANCE TO ` 19,08,112/- GIVING PARTIAL RELIEF TO THE ASSESSEE. 9. BEFORE US THE ASSESSEE HAS NOT FILED ANY DOCUMENTAR Y EVIDENCE OR FUND FLOW STATEMENT TO SUBSTANTIATE ITS CONTENTION. WE HAVE SEEN THAT THE LEARNED CIT(A) PASSED THE ORDER AFTER CONSIDERING T HE FACTS AVAILABLE BEFORE HIM. THUS WE DO NOT FIND ANY ILLEGALITY OR INFIRMIT Y IN THE ORDER PASSED BY THE CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2017. SD/ - SD/ - (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 9 TH NOVEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -21, MUMBAI 4. THE CIT -X, MUMBAI 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.